North Sea Oil and Gas Producers: Investment Allowances

Debate between Rachel Reeves and Lucy Frazer

Monday 6th June 2022 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on North sea oil and gas producers’ use of investment allowances to minimise their liability under the energy profits levy.

[The Financial Secretary to the Treasury (Lucy Frazer)]

Less than a fortnight ago, my right hon. Friend the Chancellor set out a series of measures to help British people at what we know is a difficult time. The oil and gas sector is making extraordinary profits, not as a result of recent changes to risk taking, innovation or efficiency, but as the result of surging global commodity prices, driven in part by Russia’s war. The Chancellor reassured the House that the Government

“will make sure that the most vulnerable and the least well off get the support they need, and we will also turn this moment of difficulty into a springboard for economic renewal and growth.”

He also made the point that it

“is possible to both tax extraordinary profits fairly and incentivise investment.”.—[Official Report, 26 May 2022; Vol. 715, c. 449-450.]

That is why we have introduced the energy profits levy—a new 25% surcharge on the extraordinary profits that the oil and gas sector is making. At the same time, the new 80% investment allowance will mean that businesses will get a 91p tax saving for every pound that they invest, providing them with an additional, immediate incentive to invest. That nearly doubles the tax relief available, and means that the more investment a firm makes, the less tax it will pay.

The levy took effect from 26 May this year, and will be legislated for via a Bill to be introduced shortly. It will be phased out when oil and gas prices return to historically more normal levels, with a sunset clause written into the legislation. The levy will raise about £5 billion in revenue over the next year, so that we can help families with the cost of living in the shape of significant, targeted support to millions of the most vulnerable.

[Rachel Reeves]

I am here to talk about the cost of living crisis, but where are Tory MPs today? On 26 May, the Chancellor announced a welcome U-turn on his party’s opposition to a windfall tax—a policy for which we had been calling since January. At the same time as that handbrake turn, however, he created a tax giveaway for oil and gas producers that undermined that tax. Only this morning, in a statement to shareholders, the head of Serica Energy said that these measures would offset a “large element” of the energy profits levy.

All in all, we calculate that a third or more of any revenue from the new levy might be handed straight back in tax breaks. This cashback policy is typical of the sleight of hand that we have come to expect from this Conservative Government, so can I ask the Minister how much these tax breaks will cost? When will the Government have the courtesy of sharing that analysis with the House? How can the Minister be sure how much this new levy will raise when the Chancellor has added this gigantic get-out clause? Why are the Government incentivising investment in fossil fuels over investment in home-grown renewables, which do not benefit from the tax breaks in this announcement? Have the Government even bothered to check what this means for our country’s net zero target and climate commitments?

It is not just the cashback to oil and gas producers. Can the Minister confirm that someone who owns three homes will receive £1,200 of support for their energy bills —more than a low-income family will get? This incoherent policy package was born from Conservative chaos and also from the Chancellor’s embarrassment and stubbornness. Rather than simply admitting that a windfall tax was the right idea all along, he has introduced one with a great big, costly, gaping hole in the middle of it.

[Lucy Frazer]

The hon. Lady mentions that Labour has been calling for this levy since January. She will know that January was not the right time to introduce it because we did not know then what the price cap would be. Ofgem estimated that in the week when this announcement was made. She will also know that in January, inflation was not at 9%. The Chancellor has taken this decision carefully, considering the circumstances and not just making policy on the basis of ideology.

I am sure the hon. Lady will know that Labour has made £100 billion of spending commitments, with less than £10 billion fully funded. That would almost double our current borrowing. We Conservative Members are aiming to ensure that we are fiscally responsible with taxpayers’ money.

Let me respond to two other points that the hon. Lady made. First, she will remember that when the policy was announced, we said we had estimated that it would raise £5 billion for the package of measures that we had put forward to support people with the cost of living—as she said, that is what we are talking about today. Secondly, she mentioned the importance of reaching our net zero targets. She will know that the UK, under this Government, has already decarbonised faster than any G7 economy, and that there are many other tax levers for green energy, including the super deduction and research and development tax reliefs. She will know that we are consulting on broadening the emissions trading scheme and that we have committed £1 billion to a carbon capture and storage infrastructure fund, as well as £140 million to the industrial decarbonisation and hydrogen revenue support fund. We are ensuring that we tax extraordinary profits at the same time as protecting those who are struggling with the cost of living.

Oral Answers to Questions

Debate between Rachel Reeves and Lucy Frazer

Tuesday 18th December 2018 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

16. What steps he is taking to tackle rogue bailiffs.

[The Parliamentary Under-Secretary of State for Justice (Lucy Frazer)]

We are determined to protect debtors from aggressive behaviour by enforcement agents while balancing that against the need for effective enforcement of debts. We launched a public call for evidence on 25 November to help us to understand the extent of the problem, and it is open until 17 January.

[Lucy Frazer]

I am sorry to hear about the experience of my hon. Friend’s constituent and I am happy to discuss the matter further with him. The 2014 reforms require bailiffs to send a letter before they visit to set out where a debtor can go for advice, but we want to ensure that that mechanism and others are working. We are asking that question in our consultation, so I encourage his constituent to tell us more about his experience in our call for evidence.

[Rachel Reeves]

I welcome the Government’s call for evidence. Since it was launched, the Minister has said that a small number of bailiffs are breaking the law. The truth is that a YouGov poll shows that a third of people contacted by bailiffs in the past year have experienced law breaking, so this is much more than a small problem. Will the Government therefore change the language and see where the evidence takes them, rather than concluding that a minority of bailiffs are behaving in this way?

[Lucy Frazer]

It is important to gather the evidence, which is what this consultation will do. As the hon. Lady will know, because she asked a question at the previous Justice questions when the Citizens Advice report had just come out, we want to examine the evidence fully, and we are asking for evidence not just from individuals, but from the enforcement agencies themselves. My officials have asked Citizens Advice for a meeting to discuss the content of the report, which identifies a large amount of inappropriate behaviour.

Oral Answers to Questions

Debate between Rachel Reeves and Lucy Frazer

Tuesday 13th November 2018 Commons Chamber

[Lucy Frazer]

That was a very intriguing question on one about bailiffs. This matter is reflected in our female offenders strategy, and I am sure that the Minister responsible, the Under-Secretary of State for Justice, my hon. Friend the Member for Charnwood (Edward Argar), will be very happy to discuss it further with my hon. Friend.

[Rachel Reeves (Leeds West) (Lab)]

Following on from the question asked by my hon. Friend the Member for Wolverhampton North East (Emma Reynolds) about the experience of her constituent, 2.2 million people contacted by a bailiff in the past two years have experienced the bailiff pushing the legal limits—my hon. Friend’s constituent experienced that—including forced entry into a home, removing goods needed for work and refusing a reasonable payment plan. The 2014 reforms clearly are not working. Does the Minister not agree that it is time to have an independent bailiff regulator to get a grip on these abuses of justice?

[Lucy Frazer]

I know that the hon. Lady cares deeply about the matters under discussion and was quoted this morning in relation to them. I recently met Peter Tutton, who is head of policy at StepChange. He made the point about independent regulation and we will consider it in due course.

Budget Resolutions

Debate between Rachel Reeves and Lucy Frazer

Wednesday 8th March 2017 Commons Chamber

[Rachel Reeves]

Unsecured debt, as the right hon. Gentleman knows, grew by 10% last year. That is not secured against anything solid at all. The household income ratio, which is back to being close to the levels of 2008, should sow seeds of doubt in all our minds about the sustainability of our economy. I am concerned about the ability of consumers to carry on bearing this burden. To do so, they will have to increase their debts or have real wage increases, but this Budget sees real wage growth contract sharply because of the sharp increases in inflation as a result of the depreciation of our currency. This is not an economy that is well placed to withstand the strains and shocks that lie ahead.

My argument today is that this dangerous reliance on borrowing and debt is directly connected to the Government’s failure to put wealth and opportunity in the hands of the many rather than just the few. While those on the Government Front Bench keep saying that they are on the side of ordinary people, they have not shown it in their actions today.

Last week, the Institute for Fiscal Studies reported that we are on course for a rapid rise in inequality over the next five years. The bottom 10% of the earnings distribution—those who already have the least—will see their incomes fall in the next few years, particularly due to cuts to universal credit. Meanwhile, those with the most—the top 10%—will see their take-home pay increase by 10%. That is a direct consequence of the Government’s failure to reverse our economy’s growing reliance on low-paid work and low productivity, with one in five people now paid less than the living wage, and deep cuts to in-work benefits, which make it harder for those families in work to make ends meet. That cannot be right.

However, that is not all. The Government have now ignored two independent court rulings by cutting access to disability benefits for over 160,000 people, which will save them £3.7 billion. There is no mention at all of that in the Budget. Switching people from disability living allowance to personal independence payments has also seen nearly 50,000 people lose their Motability cars because their benefits have been cut under the blatantly unfair changes to the assessment rules. That is not the sort of country I want to live in, and I do not think it is the sort of country our constituents want to live in either. Not only is this a betrayal of the hard-working majority the Government promised to put first, but it shows a callous disregard for the poorest and most vulnerable in all our communities. It is also not the way to build the better balanced and more broad-based economy we need to build for the more turbulent times we are bound to see ahead.

Let me set out a few areas where today’s decisions have been misjudged, and how the Government could have delivered a fairer Budget. First, the Government are going ahead with a £1 billion cut to inheritance tax for the richest people in our country. That money should instead be spent on expanding free childcare for families, particularly those on the lowest incomes. Almost half of this inheritance tax giveaway will go to London and the south-east; in fact, 96 of the top 100 constituencies that will benefit are in London and the south-east. But what about our constituencies in the north of England, Scotland, Wales and Northern Ireland—in the rest of the UK, which does not benefit by one penny from these cuts in inheritance tax?

[Lucy Frazer (South East Cambridgeshire) (Con)]

The hon. Lady said it was important to spend more on childcare. When the Chancellor delivered his speech, did she hear that the Government spend £6 billion a year on childcare?

[Rachel Reeves]

The hon. and learned Lady will also know that the manifesto promise the Conservative party was elected on has been delayed time and again. If she really thinks that the support that will, we hope, come forward in September will be enough to help women get back to work and to deliver the high-quality childcare we need for all children, I am afraid she is deluded.

Cutting inheritance tax is unfair and misguided, and this blatantly unfair policy is further evidence of the Government’s warped sense of priorities at a time when we should be doing far more to help the millions of families struggling with childcare costs. Just one in 2,500 people in England and Wales will benefit from this cut, which will lift 26,000 of the richest families out of inheritance tax. This measure will only deepen the north-south divide, and it is another Tory policy benefiting the already well-off, when we could be investing in the future of all our people.

Secondly, I would like to turn to the issue of the self-employed. Today, the Chancellor made changes to national insurance contributions for the self-employed. I am all in favour of cracking down on bogus self-employment, especially when employers effectively force employees to become self-employed and to lose out on the security and benefits that go with being employed. I am also all in favour of cracking down on tax avoidance as a result of individuals incorporating rather than being direct employees.

However, I am worried about these changes. My back-of-the-envelope calculations suggest that a self-employed person on £20,000 a year will end up paying £20 extra a month because of these changes in national insurance. We also know from the Budget documents and from previous announcements in Budgets that the cuts to corporation tax are worth £3.8 billion and will primarily benefit the largest businesses, yet in this Budget, we are increasing taxes on the self-employed by £2 billion. That seems to be the wrong priority: we should be doing more to help the self-employed and small businesses, and less to help the big businesses already making large profits. In the Budget documents, the Chancellor also speaks about tax avoidance, but the tax avoidance measures amount to £810 million. Again, we have this huge discrepancy: we are taking £810 million from tax avoidance, but asking the self-employed to pay an extra £2 billion.

While it is right for the Chancellor to say that we should look at access to maternity and paternity benefits for the self-employed, what about the other benefits that people take for granted if they are direct employees, such as sickness benefits, out-of-work benefits and access to universal credit? Will the Chancellor look at access to those for the self-employed, as well as ensuring that the self-employed can get a mortgage and a private pension—things that too many self-employed people find are denied to them?